Old Habits Die Hard: Modernizing Your Audit Practice

Outdated systems and applications are disconnected from one another, leading to version-control issues, collaboration issues between peers and clients, and missed opportunities to leverage them between various tools and users. Firms can maximize time and minimize risk on even the most complex audit engagements by turning to a completely integrated, cloud-native solution.

It’s important to note that using outdated systems can also lead to increased security risks. Why?

Accounting firms are gatekeepers to a treasure trove of sensitive client data and are responsible for ensuring that data is protected. Some firms, especially small to mid-sized firms, may not have the resources needed for a robust IT department. They may be using outdated software and on-premise servers, which can carry significant risks. Outdated software leaves firms open to security vulnerabilities such as malware. On-premise servers, if not properly maintained and secured, carry the risk of loss of data, as well as backup and recovery challenges. Yes, firms can store data on an off-site backup server, but this comes with additional costs and maintenance fees. Furthermore, if a laptop gets misplaced or stolen, sensitive data can fall into the wrong hands.

Cloud solutions provide greater security because they store client data on remote, encrypted servers with redundant, up-to-date security measures for retrieval only by those people authorized to access them. Leveraging the cloud also helps ensure business continuity when the unforeseen happens like a natural disaster, cyberattack, or a global event like the COVID-19 pandemic.

In short, cloud-native platforms are an essential first step toward a modernized audit practice. If your firm is still using outdated software, it’s time for a change.

Greater automation

A commonly cited study estimates that companies could be losing 20 to 30 percent in revenue each year due to inefficiencies. Is your firm among them?

The reality is that inefficiencies and bottlenecks in your firm’s workflow negatively impact productivity and time spent on tasks, quality of services, and ultimately profitability. Sharing data across applications and leveraging automation to weed out tedious, manual tasks, like double entry of data, enables firms to save time, resources, and streamline workflows.

Consider, for example, the integration of the Confirmation solution, a provider of secure audit confirmation services, with Thomson Reuters cloud audit suite. This eliminates the need to use multiple applications and enables firms to manage the full spectrum of audit tasks, including digital audit confirmations, in one place.

When evaluating an integrated, cloud-native platform consider a solution that delivers the following features, to name just a few:

• A web-based engagement management tool that requires no software downloads, updates, or versioning that impacts productivity.
• Automated document retention policies.
  
• The ability to instantly access audit data from any location with simplified workflows that eliminates the worry about transferring, backing up, restoring, or refreshing audit files.
  
• Web-based audit planning workflow management that ensures staff always has the latest version of a document.
  
• The ability to initiate, monitor, and receive confirmations all from within one application.
  
• Ingests data from 100 percent of client accounting systems in real time.
  
• An automated sampling process to save time.
  
• Automated PBC workflow and project management, as well as data extraction and validation from 100 percent of client ERP systems.

Leveraging application programming interfaces, more commonly known as APIs, is also key to achieving greater automation of key processes.

An API is a set of routines, protocols, and tools for building software applications. An API specifies how software components should interact and enables applications to exchange data and functionality. In short, APIs connect otherwise disconnected third-party systems.

With APIs, modern audit practices can:

• Avoid entering data manually to reduce the risk of errors
• Increase visibility of client needs with connected solutions
• Gain insights for analysis and decision support
• Automate key processes and reduce hours spent on mundane tasks
• Connect otherwise disconnected third-party systems

The power of data analytics, AI

Auditors can also enhance the value of the audit and transform the audit experience for both their firm and their clients by leveraging advanced technologies like data analytics and AI.

According to a KPMG/Forbes Insights survey of 250 corporate finance leaders under the age of 40, 94 percent of respondents believe advanced technologies promote the quality of the audit. Furthermore, a separate KPMG/Forbes Insights survey found that when clients were asked about the attributes they value most in their auditors, more than half (56 percent) said, “Leverages data and analytics into actionable insights.”

One of the greatest benefits of analytics and AI-enabled solutions is more efficient audit planning and the ability to analyze vast amounts of data to identify anomalies and patterns in a way that a human auditor cannot. This translates into a more effective audit and greater efficiencies for the firm.

Implementing the right AI-enabled solutions can also help auditors improve risk assessments by, for instance, identifying and aggregating risks that other firms have identified in similar types of engagements.

To further illustrate the benefits of analytics and AI, a report by the Chartered Professional Accountants of Canada (CPA Canada) and the AICPA provided the following examples:

Analytics: Can be used to dynamically visualize contract data and metrics (e.g., margin, related contract asset position) to inform risk assessment over the portfolio or analyze positions of contract types or specific contracts.

AI: Can be used to analyze contract agreements and documents for unusual terms or clauses that require additional consideration.

It is important to remember, however, that leveraging data analytics and AI-enabled solutions doesn’t eliminate the role of the auditor, but rather it improves the quality and efficiency of the audit and shifts the role of the auditor. By spending less time gathering, correlating, formatting, and summarizing data, auditors can focus more of their efforts on identifying and auditing areas of higher risk and delivering greater consultative services and strategic business insights.

As stated in the CPA Canada/AICPA report, “With the combination of today’s computing power (and ease of access to it), machine learning and AI-enabled audit tools, enormous volumes of data can be analyzed to find anomalies and identify insights, patterns, and relationships that are not readily apparent to a human. However, it takes human insight and experience to understand the output, to determine if the information represents a true anomaly and, more importantly, to determine what the anomalies, insights or patterns imply in the overall context.”

Enhance advisory services

By leveraging such advanced technologies, firms can deliver greater consultative services and strategic business insights to their clients that extend beyond the audit. This leads to stronger client relationships and, ultimately, greater profitability.

Take, for example, an auditor who has numerous clients within the construction industry and knows common ratios for that particular industry. By analyzing a client’s ratios, an auditor may be able to determine, for instance, if their gross profit percentages are much lower than expected when compared with other clients within the construction industry.

Further underscoring this point, KPMG/Forbes Insights research found that respondents gave audit high marks for providing more insights to help make more-informed business decisions. More specifically, when asked which of the following valuable insights they received as an output from their audit, respondents said:

• Insights leading to proactive quality assurance and regulatory compliance (67 percent)
• Help assessing risks and risk management practices (56 percent)
• More transparency about arriving at the audit opinion, and about what has been learned during the audit (54 percent)
• A forward-trending view of risks (47 percent)
• A more holistic view of the state and prospects of the organization (43 percent) and
• A forward-trending view of data (41 percent)

As stated in the KPMG/Forbes Insights report, “Clearly, auditors who look at the total landscape and drill down on the issues that are most relevant and important to a given organization can add the most value. Increasingly, clients are not only expecting this, but demanding this.”

Using a solution like Thomson Reuters Practice Forward, for example, enables firms to build a scalable advisory services model that will impress clients and, ultimately, generate more revenue. Practice Forward provides firms access to proven business model concepts, instructions and exclusive tools, personal consulting sessions, and more to help them take their services to the next level.

Recruit and retain top talent

Most people have grown accustomed to using the latest devices, software, and apps in their personal lives, and they desire the same ease of use, accessibility, and convenience in the technology within their workplace. Auditors are no exception.

Implementing innovative technologies isn’t only about having the latest and greatest new gadget. Modernizing your audit practice and driving greater efficiencies helps keep staff engaged, confident, and, with cloud solutions and remote capabilities, they can enjoy a better work/life balance.

When firms leverage automation to weed out mundane, manual tasks it not only reduces the risk of errors and weeds out inefficiencies, but also provides associates the time to focus on more fulfilling and rewarding work. This means happier, more engaged employees and a reduction in staff turnover.

Enabling associates to have a better work/life balance by implementing the latest cloud technologies for remote capabilities is also critical in attracting and retaining top talent. This is especially true in the wake of COVID-19.

Consider this: Before the pandemic only 20 percent of employed adults said they worked from home, according a Pew Research Center survey. Now, 71 percent of those workers are doing their job from home all or most of the time. And more than half (54 percent) said, if given a choice, they would want to keep working from home even after the pandemic.

Furthermore, the survey found that about half (49 percent) of respondents said they now have more flexibility to choose when they put in their hours, and 38 percent of new teleworkers said it’s easier now to balance work with family responsibilities.

In addition, firms that demonstrate an eagerness to invest in innovative technologies send a message to prospective, as well as current, employees that they are a future-ready, forward-looking practice.

In today’s complex and challenging environment, the talent war shows few signs of slowing. Attracting and retaining quality staff has been, and continues to be, a top concern for many firms, especially among those using antiquated technology.

Conclusion

Faced with the availability of vast amounts of data, greater client expectations, and the rise of innovative technologies like data analytics and AI, it is imperative that today’s auditors rethink how they approach their work and advance efficiencies in order to remain competitive.

For firms looking to modernize their audit practice, the journey begins with leveraging the right technologies that enable greater automation, deeper strategic business insights for their clients, and remote capabilities.

The good news is that firms don’t have to embark on this journey alone. If your firm is among those looking for guidance, a trusted solution provider like Thomson Reuters can help modernize your audit practice and transform the audit experience for both your firm and your clients.

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